Transmeta Shifts To Licensing Model

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Struggling Transmeta Corp. said Thursday that it would shift its focus toward licensing its intellectual property and continue to manufacture its Efficeon chips only for “critical” customers.

As part of its new model, Transmeta struck an engineering deal with Sony to apply Transmeta’s LongRun2 low-power technology to the Cell processor and other Sony engineering efforts. Transmeta also replaced its chief executive, Matthew Perry, with former senior vice president of marketing Art Swift.

As part of the shift, Transmeta said it had laid off 67 employees. The goal is to shift the company’s focus away from the costly business of manufacturing chips, into a model focused on intellectual property, one used by embedded microprocessor ARM Ltd., among others.

“The cornerstone of Transmeta’s reputation has always been its innovative technologies, intellectual property and the talent of its employee base,” said Art Swift, the new president and chief executive, in a statement. Swift was also asked to join Transmeta’s board. “We feel confident that our strategic direction and the decisions we have already made will have an immediate positive impact on our financial position.”

The layoffs will cost Transmeta $6 million in severance costs, the company said. For the first quarter ending in March, Transmeta expects a negative cash flow of about $16 million.

As the company indicated previously, Transmeta will discontinue its 90-nm Crusoe and Efficeon chips. Only the more advanced 90-nm Efficeon chips will be maintained, and those will be produced only for “critical customers”.

With the restructuring and change in focus, the company hopes to cut its losses to a loss of $5 million per quarter or less by the second or third quarter, and use that to move toward profitability, Transmeta chief financial officer Mark Kent said.

The company will hope to recoup some of its losses through engineering deals like the one struck with Sony. Over one hundred Transmeta engineers will be assigned to work for Sony on the “advanced Cell products,” Transmeta said.

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